$83 Million Judgment in Teleservices Group Ponzi Scheme
The backdrop to this case was featured in a 2008 episode of the CNBC show American Greed titled “The Rise and Fall of Cybernet.” A group of fraudsters used Cybernet, and its sister company Teleservices Group, to perpetrate a $100 million Ponzi scheme.
Problem
After the companies were forced into bankruptcy, Mika Meyers was hired by the bankruptcy trustee to bring claims on behalf of all the defrauded investors against a large regional bank where Cybernet had done its banking. Mika Meyers alleged that the bank had knowingly propped up the Ponzi scheme in bad faith just long enough so that it could get paid back all of the funds that it had loaned to the fraudsters.
Solution
Mika Meyers successfully fended off numerous motions to dismiss that the bank filed through its high-priced attorneys and ended up taking the case all the way to a bench trial in federal court. During the trial, Mika Meyers cross examined numerous high-ranking bank executives and managers who tried to deny that the bank had notice of the fraud or acted in bad faith. In addition, both sides called nationally renowned bank-fraud experts as witnesses in support of their case. After several weeks of trial spread over many months, the court ultimately found that Mika Meyers had proved notice and bad faith by the bank through evidence that the bank had turned a blind eye to a host of red flags of fraud. The court proceeded to enter a judgment in favor of the trustee, for the benefit of the defrauded investors, in the amount of approximately $83 million.
Judgment
Mika Meyers then successfully defended the case through two appeals, including in the United States Court of Appeals for the Sixth Circuit. Although the Sixth Circuit upheld the bankruptcy trustee’s rulings on the issues of notice and bad faith, it remanded the case for further proceedings related to the amount of damages that should be awarded. Before those proceedings began, the parties reached a substantial settlement that brought justice and relief for hundreds of defrauded investors.
